Science Exchange Takes On $28M To Help Companies Outsource R&D

Elizabeth Iorns was a postdoctoral researcher working on potential treatments for breast cancer when she hit a wall: the genes she was studying had some interesting profiles to explore, but there was no one at the University of Miami, or even close by, qualified to conduct the highly technical analysis she needed. Looking for outside help wasn't much better. "I realized there were a lot of challenges in determining who was available, let alone who was qualified," Iorns says.

So Iorns became an entrepreneur. Her company Science Exchange serves as a marketplace to match companies with outside labs to conduct their research and development. Founded in 2011, the startup already works with more than 1,000 companies and has screened and approved 2,500 service providers to handle their requests.

Science Exchange is looking to build out that network much bigger: the startup just raised $28 million in Series C funding led by Norwest Venture Partners, with existing investors Union Square Ventures, Maverick Capital and Collaborative Fund all participating. The new round brings the company's total funding to close to $60 million.

Scientists at companies big and small who want to access Science Exchange's network can log in to see qualified and available contract research shops within their field. They request quotes through the software, then can place an immediate order with the best fit. Iorns and her team charge a transaction fee of between 5% and 10%. Because they handle much of the back-end —customers don't need to draft new legal materials and go through compliance every time — Iorns says her service can shave several months off the contracting process and end up costing less than the alternative legal fees alone.

The Y Combinator alum started with her own problem, academic researchers, but Science Exchange has moved more into big pharma and biotech in the past two years, both of which now account for the majority of revenue. Eventually Iorns hopes to support research in a much wider range of industries, including aerospace, agricultural sciences, chemicals, cosmetics and food. The company will use the new funding to expand its engineering team as well as its support team of PhD scientists, who monitor projects on the platform and help flag new types of research to add to the company's market. Such scientists currently make up about 14 of the startup's 60 staff in Palo Alto, Boston, Iorns' native New Zealand and Europe.

The majority of service providers in Science Exchange's network today are based in the U.S., with 60%, but just half the research getting contracted out is coming from the States. Europe accounts for 35%, and Asia the other 15%, concentrated in Japan. Customers include Gilead, NASA and Merck.

With about 40% of R&D dollars outsourced today, according to Science Exchange, the market opportunity for such research could take a large slice out of $140 billion in total spend for research in biotech and pharma today, says Norwest investor Casper de Clercq. If Science Exchange were to someday capture half that market, charging a 5% fee, revenue would swell to $3.5 billion.

Such lofty numbers are, of course, far off from Science Exchange's reality today. And the startup will also have to manage the risk of serving as a virtual contract research organization (CRO) as it takes responsibility for the IP of clients working with the smaller vendors on its site. Its investor de Clercq says that one advantage is that Science Exchange has figured out how to offer one unified contract to customers that can cover all the agreements in the back-end allowing its research to start.

As the sum of its parts, Science Exchange functions as something like the largest CRO in the world, Iorns claims. "It used to be a side thought to manage projects coming outside an organization," says Iorns. "It's a challenge to know who is available and qualified. But we come in with our software platform and we have all of that."

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